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Jun 27, 2023
Foreign Direct Investment (FDI) has an enormous impact on the economic development of any country. Recently, the Union Minister, Hon’ble Shri Nitin Gadkari, said that India is in considerable need of Rs. 50-60 lakh crores of FDI and the money can be easily tapped by infrastructure projects as well as by the MSME sector to stimulate the wheels of the coronavirus-hit-economy. Such funds would serve the country as there is a call to inject liquidity in the Indian market.
The Government has announced some changes in the FDI policies as a guard to the interest of the Indian companies and to limit the ‘opportunistic takeovers and acquisitions of Indian companies due to the current COVID-19 pandemic’.
With the variations in the FDI policies, the burden of responsibility now lies on the Government’s shoulders to make sure that the foreign capital keeps flowing into the country and the interest of our domestic companies is prophylactic.
The prompt element that influenced the Government to take this significant step of change in the FDI policy is China. As the anxieties, pressures and stress between both the countries – India and China started to mount up, people around the country stood in favour of forbidding Chinese products. These amended rules coming into the picture will halt China from either directly or indirectly funding in the country. Though this move could cause India more hurt, it is also the need of the hour.
IMF believes that India’s GDP will grow at 1.9% in FY 20-21, which may be the country’s worst performance since the economic liberalisation of 1991. The Government is steadfast on pushing the Make in India programme aggressively to invite foreign investors in the country. On the one hand, India wants to attract FDI and impress the international companies and investors, but on the other hand, it wishes to restrict imports and puts up restrictions to safeguard the interest of the domestic companies. This is a dilemma as finding a middle ground or a win-win situation seems like a difficult task. China is a leading investor in India, is one of the most important sources of FDI in the country. According to the Commerce and Industry Minister Shri Piyush Goyal, the foreign direct investment from China stood at a total of $1.8 billion between 2015 and 2019. Major Indian start-ups like Paytm, Byju’s, Oyo, Big Basket and Ola have also relied heavily on the Chinese investment. However, due to a restriction imposed by the new FDI Rule, investments in the significant sectors of the Indian economy will see a setback.
This calls for the most urgent need of the different ways for making up to this loss. How is India going to equalise these inflows from China? What is the next move of the Government? How far would the Indian economy survive without the help of these Chinese investments?
Though the tensions halt investments from China, there is still good news for India. The COVID-19 pandemic can prove to be of more benefit for the Indian economy and here’s how.
It is a recognised point that China has been one of the world’s most promising locations for investment. Today, China being the epicentre of the ongoing pandemic and the already failing trade relations between the US and China, has shifted the attention of the investors. Many foreign investors and foreign companies are stepping out of China and looking for expansion opportunities in other Asian countries. Considering India’s favourable climate for investment and also the Government initiatives, India can be the next most favourable option and grabbing this opportunity will induce the much-needed foreign investment in India.
In the Post-COVID world, India has the opportunity to invite all those companies leaving China due to the trust deficiency. Can this trust deficiency result as a trade surplus for India?
Only time can give us the answer, but planning and coming forward with favourable strategies to emerge as an attraction is the need of the hour.
China being rich in labour, has attracted the world’s manufacturing companies to set up their industries in China. India has the advantage of abundance in labour, and this will prove to be an attraction for the manufacturing companies to turn to India. With an investment in the manufacturing sector, the employment opportunities will also generate and result in reviving the economy.
‘Make in India’ is an alluring programme. The main objective of the said scheme is to attract investments from all around the globe and strengthen India’s manufacturing sector. India has the requisite skills, talent, discipline, labour, mind and numerous other benefits over the other countries that are ready for put to use. It is time that India puts its best foot forward before the economies of the world since; this is the right time to go global.
Yes, India can become ‘Atmanirbhar’ by promoting the Make in India scheme and encouraging the local produce at lower prices.
The economic opportunities urged by the pandemic for India is only waiting for us to make the optimum use of it. A ‘Pro-India’ psychology is about to play a significant role in the post-COVID world. Many US companies are already considering India as a favourable investment destination. Around 100 US firms may shift to India, which hints at a significant relieve for India in terms of FDI pressure. Uttar Pradesh is being seen as the most feasible place to start up new manufacturing units as the state is home to more than 90 lakh MSME and skilled labour.
Speaking at the India Global Week 2020, which is a three-day virtual conference themed as ‘Be The Revival: India and a Better New World’.
“Prime Minister Narendra Modi said, “We are making the economy more fruitful, investment-friendly and competitive. There are many possibilities of opportunities in numerous sunrise sectors in India.”
In conversation with PM Modi, the following details were highlighted:
•India is setting a red carpet for all the global companies to come and build their presence in India.
•India has the spirit to accomplish what is believed to be impossible.
•In the process of global revival, India will play a leading role.
The opportunities being opened by India today for rejuvenating the Indian economy along with the global revival is what very rare countries will offer today.
India has also been taking proactive measures to attract foreign prospects/interests to invest in India. ‘The Invest India Business Immunity Platform’ is another 24*7 active resource to help business and investors get real-time updates on India’s proactive responses to the pandemic.
The evidence that Facebook declared a multi-billion-dollar investment in Reliance Jio is confirmation that the foreign investors have confidence, trust, belief and faith in India and its people and they embrace our country, India as a favoured and valued platform. If all this falls in place, it is but a matter of time that the foreign investments start to rise at an increasing pace.
We, firmly believe that once the COVID-19 crisis settles, India will have the best possibility to attract hundreds and thousands of foreign companies into our country.
As much as it is an opportunity, it is also a hurdle to avail the benefit from the state of conditions. “In the middle of difficulty lies opportunity” excerpted by Albert Einstein and there isn’t a more suitable time to prove this right.
In conclusion, India has the potential to recover its economy and become self-reliant by attracting foreign investment through initiatives like Make in India. The shift of global investors from China presents an opportunity for India to emerge as a favorable investment destination and revive its manufacturing sector. The government's proactive measures and the confidence shown by foreign investors indicate a positive trajectory for India's economic revival in the post-COVID world. Despite the challenges, India can seize this opportunity and position itself as a leading player in the global economy.
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Disclaimer: The information provided in this blog is for general purposes only and should not be considered as professional advice.
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